§ Mr. Austin MitchellTo ask the Chancellor of the Exchequer (1) what was the percentage change in nominal724W exchange rate between February 1993 and January 1994; and what were the policy considerations underlying this;
(2) what priority he attaches when he increases interest rates to (a) defending the exchange rate and (b) controlling inflation; and if he will make a statement on the connection between the two processes.
§ Mr. NelsonInterest rates are set to deliver low inflation. Since changes in interest rates influence inflation with a lag, interest rate decisions are based on an assessment of the prospects for underlying inflation in one to two years' time. This assessment is based on a wide range of information including movements in the exchange rate. While the Government recognise the value of exchange rate stability, they do not have a target for the exchange rate. Figures for the nominal exchange rate are published by the Central Statistical Office in table 7.1 A of "Financial Statistics", a copy of which is in the Library.
§ Mr. Austin MitchellTo ask the Chancellor of the Exchequer what assessment he has made of the effect of the change in the exchange rate between February 1993 and January 1994 on the competitiveness of British manufactured goods at home and overseas.
§ Mr. NelsonAn assessment of developments in trade and the balance of payments, including competitiveness, was published in chapter 3 of the November 1994 "Financial Statement and Budget Report". This took full account of changes in the level of the exchange rate.